Beating the student-loan trap

WASHINGTON — We know that many students have to borrow in order to attend college. On top of that, the interest rates on many new federal student loans doubled on July 1 from 3.4 percent to 6.8 percent.

There are congressional efforts to lower the rates. But regardless of whether congressional Republicans and Democrats find a compromise on the student loan interest rate, the bigger issue is curbing the cost of college so that interest rates don’t matter as much. This is particularly important since a large number of students borrow and then don’t finish college.

Just a little more than 50 percent of those who enter college leave with a bachelor’s degree, notes Jeffrey J. Selingo, editor at large for The Chronicle of Higher Education. Selingo has written a compelling book looking at the state of higher education. “College (Un)bound: The Future of Higher Education and What it Means for Students” (Amazon Publishing/New Harvest, $26) is the July Color of Money Book Club selection.

“American higher education is broken,” Selingo writes. “Like another American icon — the auto industry in Detroit — the higher-education industry is beset by hubris, opposition to change, and resistance to accountability.”

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Part of the reason higher education is in trouble can be traced to the “Lost Decade,” as Selingo calls it. He defines this time as the period from 1999 to 2009 when colleges were “chasing high-achieving students, showering them with scholarships to snatch them from competitors, and going deep into debt to build lavish residence halls, recreational facilities, and other amenities that contribute nothing to the actual learning of students.”

But the decade of more has come to an end, leaving many people in debt. In 2003, according to Selingo, only two colleges charged more than $40,000 annually for tuition, fees, room and board. By 2009, 224 had crossed the mark, and another 58 had passed the $50,000 plateau.

Selingo takes the approach that we can’t move forward without looking back. He talks about how we arrived at colleges becoming similar to corporations — with administrative salaries ballooning — to the great credential race in which colleges and universities created an “almost insatiable demand for college credentials” by people looking to gain a competitive advantage in the job market.

“For the unemployed or those stuck in dead-end jobs, the constant barrage of advertisements by colleges seems to offer a way to stand out in a pile of job applicants,” Selingo writes. “The bachelor’s degree, the symbol of success and the ticket to the middle class for the post-World War II generations, has slowly become the new high-school diploma.”

The schools themselves have been racing to gain prestige. “But as with individuals who try to differentiate themselves by earning another credential,” Selingo writes, “the vast majority of schools that try to stand out end up looking like everyone else trying to do the same thing.”

Selingo’s historical tour of higher education is important in order to understand how to resolve the problems in the scholastic industry. You come away with a keener understanding of why college costs so much and how schools have been able to get families to ignore prices. His research is peppered with real-life examples of high-school students sold on colleges they couldn’t afford. “I was really stubborn,” he quotes one young woman. “I wasn’t going to let anyone tell me I couldn’t go because my parents didn’t make a lot of money.”

But she needed to be told because her financial aid package was top-heavy with student loans. “Under pressure, families sometimes make bad financial decisions: students because they don’t know any better and parents because they don’t want to disappoint their sons and daughters,” Selingo reports.

Moving forward to the future, Selingo talks about the forces that are and will continue to change higher education. Schools are in debt, state funds to colleges have been cut, and fewer families are willing to pay skyrocketing prices. Such developments will force schools to deliver their product in increasingly different ways, such as providing more online courses. He profiles a program that allows students, especially older adults returning to college, to demonstrate the mastery of a subject through a series of assessment tests, thereby reducing the time and money they need to spend to get a degree. He sees an unbundling of the traditional structured college experience.

This is a compelling look at higher education. Selingo is critical but he’s also encouraging. With so much time and money at stake, the issues he raises and the possibilities he explores are well worth your time.

I’ll be hosting a live online discussion about “College (Un)bound” at noon Eastern on Aug. 8 at washingtonpost.com/discussions. Selingo will join me to answer your questions. Every month, I randomly select readers to receive a copy of the featured book, which is donated by the publisher. For a chance to win a copy of this month’s selection, send an email to colorofmoney@washpost.com with your name and address.

Readers can write to Michelle Singletary c/o The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071. Her email address is singletarym@washpost.com. Follow her on Twitter (@SingletaryM) or Facebook (www.facebook.com/MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.